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Engagement Letters and Fee Agreements in Illinois Following Dowling v. Chicago Options Assocs., Inc.

A 2007 Illinois Supreme Court decision, Dowling v. Chicago Options Assoc., Inc., 875 N.E.2d 1012 (Ill. 2007), noted that any written fee arrangement or retainer agreement, regardless of the type of retainer contemplated, should clearly define the kind of retainer being paid. It also recognized the viability of advance payment retainers in Illinois. In an Emerging Issues Analysis, Attorney and Wealth Strategist David A. Berek reviews engagement letters and the impact of Dowling in Illinois. The author writes:

In practice, attorneys who generally bill on an hourly basis send engagement letters, while attorneys who work on a contingency fee basis use written fee agreements. The Illinois Rules of Professional Conduct (IRPC) require attorneys who work on a contingency fee basis to document the arrangement, while attorneys who earn other types of fees (e.g., hourly rate) are required to communicate the fee arrangement to the client within a reasonable time after commencing the representation. Rule 1.5(b) of the IRPC states that a lawyer who has not regularly represented a client should communicate to that client the basis or rate of the fee before or within a reasonable time after commencing the representation. The provision is based on a similar rule in the American Bar Association's Model Rules of Professional Conduct, which adds that it is preferable to communicate the basis for the fee in writing. Fees should be discussed with the client at the earliest reasonable opportunity. The lawyer should explain the manner in which the fee will be determined (such as based on the hourly rates of the lawyers involved) and, if appropriate, provide a fee estimate.

The basis for the fee can be communicated through an engagement letter. The letter also can serve the function of confirming the scope of the engagement and explaining professional issues, such as the dual representation of husband and wife and the impact of Circular 230 on the attorney's responsibilities in providing written tax advice. Ideally, a copy of the engagement letter should be signed by the client and placed in the client's file. (See Form 1.10 in Illinois Estate Planning, Will Drafting, and Estate Administration, Matthew Bender.)

Five key elements that should be considered when preparing an engagement letter include: (1) define the scope of the representation, (2) identify the client, (3) describe the fee arrangement in detail, (4) dont forget to use engagement letters when you undertake new matters for existing clients, and (5) the engagement letter should not only define when the representation will begin but when it will end. (See Thar, Engagement Letters Can Reduce Malpractice Claims, Illinois Bar Journal (February, 1996) Another source for engagement letters is the American college of Trust and Estate Counsel (ACTEC) which posts extensive samples on their public website actec.org.

A 2007 Illinois Supreme Court decision discussed fee arrangements, and provided a guide on how to detail fee arrangements, in, for example, an engagement letter. (Dowling v. Chicago Options Assoc., Inc., 875 N.E.2d 1012 (Ill. 2007)) ...

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David A. Berek is a Wealth Strategist in the Wealth Planning group working with Relationship Managers in advising clients regarding private wealth planning. He is also a Family CFO on the planning team of the Family Wealth Management group at Credit Suisse. Family Wealth Management is the multi-family office service offered by Credit Suisse. As a Family CFO, Mr. Berek works with ultra high net worth families and is responsible for coordinating the familys financial and estate planning goals with investment management. He works as a facilitator between Credit Suisse clients and their outside advisors including trust and estate planning attorneys, certified public accountants, and insurance professionals to help the family meet their financial goals.

Prior to joining Credit Suisse in 2005, Mr. Berek practiced for 6 years as a trust and estate planning attorney, most recently with McGuireWoods LLP and Kirkland & Ellis LLP. Mr. Berek also has 7 years of public accounting experience with Arthur Andersen LLP and Coopers & Lybrand LLP specializing in the taxation of high net worth individuals, and 4 years of experience in estate settlement and trust administration with The Northern Trust Company.

Mr. Berek is licensed to practice law in Illinois and Florida and is awarded an AV peer review rating by Martindale-Hubbell which is the highest rating available for both legal abilities and ethical standards. Mr. Berek is also a Certified Public Accountant (Illinois), and a Certified Financial Planner.